Russian national named in $82M hacking scheme denied bail

A Russian millionaire who U.S. authorities allege participated in a scheme to steal information on computer networks and use it for insider trading, illegally bringing in tens of millions of dollars, was denied bail Wednesday.

Vladislav Klyushin, 41, who works for an information technology company with ties to the upper levels of the Russian government, is one of five Russian nationals who played a role in the scheme that netted $82 million from 2018 through 2020, federal authorities said. The others remain at large.

Prosecutor Seth Kosto said Klyushin is a flight risk because Russia does not have an extradition agreement with the U.S. and Klyushin did not consent to extradition, among other reasons.

Klyushin’s attorney, Maksim Nemtsev, asked for release with conditions, including $2.5 million bond, and home detention in a one-bedroom unit in Boston’s Seaport District with electronic monitoring.

An email seeking comment was left with Nemtsev after the hearing. He previously said in court documents that Klyushin “intends to challenge the government’s case in a lawful, professional and principled manner.”

U.S. District Court Magistrate Judge Marianne Bowler in Boston agreed with the prosecution, saying as a sophisticated businessman and international traveler, Klyushin “presents a substantial risk of flight.”

She also seemed dubious of several letters of support from Klyushin’s wife and friends, saying there was no way to contact the writers and they all start in a similar vein. “Therefore I do not give heavy weight to them,” she said.

Klyushin, who appeared at Wednesday’s hearing via video, pleaded not guilty to conspiring to obtain unauthorized access to computers, and to commit wire fraud and securities fraud; aiding and abetting wire fraud; aiding and abetting unauthorized access to computers; and aiding and abetting securities fraud. If convicted of all charges he faces a maximum of 50 years in prison.

Klyushin, a married father of five whose last name is sometimes spelled Kliushin, was arrested in Sion, Switzerland, on March 21 just after he arrived on a private jet and before he and his party were about to board a private helicopter to whisk them to a nearby ski resort, according to court documents.

He fought extradition to the U.S., that included at least two appeals of the Swiss Ministry of Justice’s decision ordering his extradition, including one that went to Switzerland’s highest court, prosecutors said.

He was finally extradited to the U.S. on Dec. 18.

In court documents, U.S. prosecutors say Klyushin has close ties to Ivan Ermakov, a former officer in the Russian Main Intelligence Directorate, known as the GRU, who was previously charged in July 2018 for his alleged role in a Russian effort to meddle in the 2016 U.S. elections, prosecutors said.

Klyushin, Ermakov and a third defendant worked at M-13, a Moscow-based information technology company that purported to provide services to detect vulnerabilities in computer systems, and counted among its clients the administration of Russian Federation President Vladimir Putin and other government entities, U.S. prosecutors said.

Klyushin was listed as the company’s first deputy general director and Ermakov was listed as a deputy general director, according to an FBI affidavit in the case.

U.S. prosecutors have not said whether they think Klyushin was involved in the election interference.

Ermakov was also charged in connection with an alleged role into a hacking campaign that targeted international anti-doping agencies, sporting federations, and anti-doping officials, prosecutors said.

The information in the insider trading case was acquired through unauthorized intrusions into the computer networks of two U.S.-based vendors that publicly traded companies use to make filings through the Securities and Exchange Commission, prosecutors said.

The defendants accessed earnings-related files of several notable U.S. companies including Tesla, Snap Inc., Roku, Nielsen and Kohl’s days before earnings reports were made public, according to the FBI affidavit.

On several occasions, the hackers used computer servers located in Massachusetts, according to the FBI affidavit.

By getting a company’s financial information ahead of time, the defendants were able to make trades using brokerage accounts, sometimes in their own names, based on whether a company’s shares would likely rise or fall following the public disclosure of the information, prosecutors said.

If a company was about to release positive financial results, they would buy shares of that company, and if a company was about to report poor results, they would sell, according to authorities.

To access the vendor systems, they deployed malicious infrastructure to gather employees’ usernames and passwords, which they then used to misrepresent themselves as employees in order to obtain access to the computer networks. They also used various methods to conceal their activities, prosecutors said.

Klyushin’s next court appearance is Feb. 8.

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